Books have been central to our history - in particular, the history of ideas - and to human experience. First, painstakingly hand crafted and painted, then hot off Caxton's printing presses, then sold as sixpenny paperbacks, finally mass marketed for a post-second world war public hungry for self-improvement. From the pages of books have come fable, soap opera, knowledge, solace and inspiration for many hundreds of years.

Matthew Arnold, the critic, poet and teacher, writing in Culture and Anarchy in 1869, believed social equality would result from the spread of culture, that all people could live in "sweetness and light" if exposed to the civilising influence of books.

He wrote: "Futile as are many bookmen and helpless as books and reading often prove, for bringing nearer to perfection those who use them, one must, I think, be struck more and more, the longer one lives, with how much in our present society a man's life of each day depends for its solidity and value on whether he reads during that day."

Many of us might agree that we do, perhaps unconsciously, judge people by the hours they spend reading and by what they read.

Jonathan Rose's vivid book, The Intellectual Life of the British Working Classes (2001), charts the liberation that books brought to working men and women in the 19th and 20th centuries: reading aloud in factories to large groups of workers, the development of working-class libraries, the power of the Workers' Educational Association. In short, the power of the book to spread education and democracy and to lift the sights and consciousness of an emerging working class.

For many women in particular, this was a profound liberation. Rose quotes Elizabeth Bryson, born to a poor bookkeeper in Dundee, who encountered what she called "the exciting experience of being kindled to the point of explosion by the fire of words". "From the earliest days," she wrote, "we are striving to become articulate, struggling to clothe in words our vague perceptions and questionings. Suddenly, blazing from the printed page, there are the words, the true resounding words we couldn't find. It is an exciting moment." Inspired by what she read, she went on to become one of the first woman doctors.

For the last 200 years, the power of books has been unparalleled. But by the 1980s and 90s that success - which had continued to grow, despite the parallel growth of newspapers, cinema and then television - was being challenged. The pace of technological change, the explosion in new, fast, interactive media, was giving some writers, publishers, and booksellers a crisis of confidence. A cacophony of doomsayers predicted the end of books and the disintegration of literature.

One of the most eloquent of these predictions came from the writer and philosopher George Steiner: "It may well be that the age of the book in its classical sense is now coming to a very gradual end. That age spans, very roughly, the period from the 1550s to the 1950s: 400 very short years. The information base that can be gathered swiftly and accurately by the new electronic media is such that in many respects the book today is antiquarian, as luxurious an instrument as was the illuminated manuscript after Gutenberg."

Publishing is a mature industry that has not seen much real growth over the past seven years. We know how vulnerable we are to economic and global forces beyond our control. We have had to learn to cope with rising costs, hyperinflation in some authors' advances, a newly aggressive competitive environment, ever-rising returns of unsold stock from bookshops and chains, and falling revenues per copy sold after the demise of the Net Book Agreement.

Bookshops in the UK enjoy the highest discounts in the world from publishers and our book buyers the lowest prices relative to the size of our market. We publish over 125,000 new titles a year in the UK, more than the US. We have supermarkets as well as bookstores selling books (although their constant and, some would argue, unrealistic downward pressure on prices has seen one of the most serious threats to a wholesaler in the UK in 20 years and, indeed, to the industry as a whole). We have direct and mail-order book channels, online booksellers, and yet the choice and depth of range offered in the high street and superstores is in decline as more and more chain bookshop focus goes on three-for-two paperback promotions and we see our backlist (and with it the choice for consumers) shrink before our eyes. And there is no point in pretending that other media do not have an appeal, particularly to the young.

But despite the very real pressures and the new technologies, I do not believe the apocalyptic predictions will be realised. I am optimistic about the book industry and the future of books because, in their unflamboyant way, books penetrate the cynicism, confusion, and anxiety of the age. World Book Day is one of the most exciting expressions of that optimism. It now hands out 12 million £1 book tokens to school children, signing up primary and secondary schools to the project, and successfully increasing book sales and reading.

There are other grounds for optimism. The charity Bookstart has successfully teamed up with the government's "Sure Start" programme to bring books to the very young. Volunteer Reading Help has done magnificent work pairing volunteers with adults and children to tackle illiteracy. The BBC's Big Read gave a huge boost to the profile of books and reading and got the nation talking about their favourite novels. More recently, Richard and Judy's Bookclub on Channel 4 catapulted Joseph O'Connor's Star of the Sea to the top of the bestseller lists.

Children - a new generation of readers - are queuing at midnight to buy JK Rowling's Harry Potter books. Last year, British writers such as Ian McEwan, Allison Pearson, Robert Harris and Mark Haddon penetrated the American market more successfully than ever before. Another British success, Philip Pullman, describes the enduring power of books: "This private secret space, this hidden empire that opens out between the book and yourself, is precious. In an age when there are more distractions and ways of filling time - or wasting time - than human beings have ever had before, this rich, consoling, inspiring, liberating solitude is more valuable than ever. We must lead our children to it and show them the way."

Pullman describes the physical attributes of books which will always prevail over the attraction of the computer screen. "The blackness of the ink on the paper, the colour of the paper itself, the texture and weight of it, the stiffness with which a new book at first resists. These physical things join us to the book because we're physical too."

The power of the book for this age, at this time, was brought home to me at a 21st century marketing conference I attended recently. I sat there listening to the marketing wisdom of the moment. The cutting-edge thinking was all about customisation and personalisation. The need to move beyond uniformity to tailor offers to the individual. The end of deference and top-down forms of communication. The need to find the tipping point, the viral marketing techniques, the word-of-mouth that builds a critical mass of satisfied clients.

The qualities that brands and institutions want are trust, authenticity, emotion, respect, personalisation and empowerment. Presentations outlined the exponential increase in the media, with individuals having to contend with a bewildering amount of messages: hundreds of TV channels, millions of websites, 250 commercial radio stations, 8,000 magazines, third-generation mobile phones, text messaging. Every Saturday or Sunday broadsheet newspaper contains more information than the average person in the 17th century would have been exposed to in a lifetime.

The result is the ever-increasing necessity to shout louder to get heard. The accent is on the sensational, the personal, the controversial, anything to stand out from the crowd. It means that seriousness, reflection, and balance are squeezed out. And one of the effects is a spiralling crisis in the relationship between media, politics and the people. The media is accused of distortion and cynicism, the government is accused of spin in its attempts to get over its message and the public ends up confused, disillusioned and often angry. This relationship is near breaking point. This is the world of inauthentic communication; communication that is losing trust. Both media and politicians need to step back and rethink the relationship.

Yet people crave moments of authenticity. And so as I listened to those marketing presentations, as speaker after speaker outlined the attributes of successful products and campaigns, one word kept coming into my mind: books. What the marketeers believed to be desirable in every product were the very characteristics of the industry I had been part of all my life. The oldest of all the media, ironically, is the one most in tune with the times.

The book is authentic communication. It is bottom-up communication. The book thrives on word of mouth: you only have to look at the growth in book clubs, reading groups, books given as presents, communities of readers sharing a deeply personal experience.

I was amused by a phone call I got last year from an advertising agency working for a national newspaper. It was preparing case studies on the success of Sebastian Faulks' Birdsong and Louis de Bernières' Captain Corelli's Mandolin to understand how to manufacture its own word-of-mouth campaigns. The obvious point it missed was that for these two books word-of-mouth was not manufactured. It was real and based on thousands of people up and down the country reading the books, loving them and recommending them. The substance comes first, not the marketing campaign.

That is why people turn increasingly to books to help them to achieve, to make the most of their leisure time, to help them lead a more fulfilling life, whether it's learning a language, creating a garden, cooking for friends, exploring Paris or raising children. And the very innovations that are sometimes seen as a threat to the book often depend on the book for their ideas and inspiration. Top Hollywood films like Cold Mountain, Jurassic Park or Lord of the Rings. Or Trainspotting, a British success, based on Irvine Welsh's novel, and Joe Simpson's Touching the Void - a wonderful example of a film illustrating a book. Or TV hits like Pride and Prejudice, Emma, Middlemarch, or serial films based on novels by PD James or Ruth Rendell.

And though the book industry may be the quietest of the creative industries, it is the one that speaks most powerfully to our desire to make sense of the world around us. That is why, particularly at times of anxiety or trouble, as after September 11, people turned to books. The sales of books to do with Islam or terrorism or the Middle East soared as people looked for more reflective writing. They wanted to understand.

Only last week we learned that sales of TE Lawrence's Seven Pillars of Wisdom have increased eight-fold as the book is snapped up by experts trying to learn how to deal with the various Iraqi forces emerging since the end of Saddam Hussein's rule. Books do not necessarily represent the truth any more than other media. And there are bad books as well as bad journalism. But what they avoid (in most cases) is getting caught up in the daily obsession with being first to the news, first with the scoop, the paranoia of missing "the" story. Books can take a longer view and tackle subjects in greater depth.

Books will never again play the unique role of 100 years ago, however. There will be other sources of knowledge and information like the internet. There will be other engaging media for story-telling such as the cinema or TV. But the enduring value of books will be driven by trust and authenticity. Books can, and I believe will, be part of the fight-back against trivia, spin, sensationalism, ephemera and short cuts. They will be what people turn to for a more profound connection, for greater meaning and understanding. And that is why I believe books will matter more than ever.

Our standing in the world is determined, for many, not by the strength of our economy or the skill of our armed forces, but by the culture we produce and export: the authors, the architects, the film stars, the designers, the BBC. And I am passionate about the need for us to promote Britain's contribution. Other countries, such as the US, ruthlessly promote their culture around the world; it is time we were as upfront about our own. So we need to talk up British novels, the British experience, and our take on the world.

Important though books are, in tune with the times though they may be, there is a sting in the tale, however. We know that for too many children and adults the magical world described by Pullman is closed. Words on a page remain just that, words on a page; with no meaning, no sense, no flow, and no coherence. Despite the surveys of reading habits showing that the hours spent reading are, if anything, growing, illiteracy remains the single greatest barrier to getting on in life. Reading is not just about enjoyment; it is a necessity, the basic tool of education. To be unable to read a medicine bottle, fill out a tax form, get the best deal on insurance or buy the cheapest holiday is to go through life permanently at a disadvantage.

The government realised this with its big push on the basics in primary schools in its first term. And there was clearly a step change in results. But I'm not sure that focus has been sustained. I applaud the money going into schools on buildings and computers. But the obsession has been computers, computers, computers, when on the evidence of a lot of research, the focus should be books, books, books. Researchers based at the Open University and Staffordshire University, working from data compiled through Ofsted inspections, have shown a link between attainment and adequate book provision.

There has been a rapid decline in book buying in schools - down 13% in primary schools in 2003 and down 8% in secondary schools. Overall, purchases are 36% down on 1998 and still declining. In part this may be the schools themselves not prioritising books. Whatever the reason, if we are to raise standards more rapidly in our schools, children should not have to share books or go without. The government talks of personalised learning and that is important. The book is central to this big idea.

So now is no time for complacency. The Pearl Study shows that we are third in the world ranking for literacy among 10-year-olds, and yet 25% of 11-year-olds are still not sufficiently good readers and there are potentially 7m adults who cannot read well enough to benefit from books. Often this illiteracy is passed through generations, as parents who can't read themselves are unable to help their children with reading. That is why the drive for literacy in schools must be carried out in partnership with the drive for literacy in adults.

The ability to read must be a basic right of every citizen. As Philip Pullman writes: "When you're reading you are the equal partner in the making of meaning, we are in control of the speed process. We go at the rate we want, not the rate someone else has decided for us. When we've finished reading, we bring away what we ourselves and the text have made together. If we don't contribute, if we don't take part, we get nothing. If we do, we get a world. That's what I mean by the democracy of the text and it's why printing and publishing and libraries and literacy and booksellers and writers and books are more necessary than ever and why reading and democracy are not different things not even different aspects of something else; they are the very same thing."

Books will continue to thrive no matter how crowded or raucous the media market becomes. It is because they embody two of the most prized (but elusive) commodities of our age - authenticity and trust. But we must do more to encourage reading and much more to create a learning culture in which the fundamental necessity of basic literacy and education is spread yet more widely and ingrained more deeply in the British psyche. The more people's lives can be touched and changed by books, the more fulfilled and successful future generations of the British people will be.

·Gail Rebuck is chairman and chief executive of The Random House Group. This is an edited extract from her speech at the Guardian World Book Day Forum on March 3